The Provision in the absence of Partnership deed

Partnership Deed is an agreement between the partners of a partnership firm to carry out the business activities under a common banner of a partnership firm is termed as Partnership Deed. To form a partnership business, a partnership agreement is required. Following are the provision in the absence of partnership deed.

Provision in Absence of Partnership Deed/When Partnership Deed is Silent

In absence of partnership deed or when a partnership deed is silent on any fronts, then the following rules should be applied.

Profit Sharing Ratio: In absence of a partnership deed or when the partnership deed does not provide any provisions relating to profit sharing ratio, then profits and losses are shared equally among all the partners irrespective of their capital contributions.

Interest on Capital: In absence of a partnership deed, no interest shall be allowed to any partners on the capital invested by them.

Interest on Drawings: In the absence of a partnership deed, no interest is charged from the partners on the amount of drawings made by them individually.

Interest on Loans or Advances: Sometimes, partners advance loan to their partnership firm. In such a case, the partners (who advanced the loan) are entitled to receive interest on the loan @ 6% per annum. The interest on loan to the partners has to be provided even in the absence of a partnership deed. As interest on loan is an obligation for a partnership firm, so it is liable to pay such interest under every circumstances,irrespective of profits earned or losses incurred by the firm.

Salary or Remunerations to Partners: In absence of a partnership deed, the partners are not entitled to receive any salary or remuneration for participating in the business of the firm.

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